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29/09/2016

Nord Stream 2 will kill EU’s LNG strategy, warns US ambassador

Energy

Nord Stream 2 will kill EU’s LNG strategy, warns US ambassador

Former US Ambassador to the EU and Azerbaijan Richard Morningstar

[Valsts kanceleja/Flickr]

The controversial Nord Stream 2 pipeline will wreck the EU’s Energy Union strategy and kill off its plans to boost Liquefied Natural Gas (LNG) in the bloc, a veteran US ambassador has warned.

Richard Morningstar said that the Germany-backed project would only worsen the EU’s addiction to Russian gas.

“If you want to kill the LNG strategy go ahead with Nord Stream,” the former ambassador to the EU and Azerbaijan yesterday (23 February) told an event in Brussels.

The European Commission last week unveiled its plans to increase LNG imports to the bloc. The imports would increase energy security by making the EU less dependent on Russian gas.

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Nord Stream 2 is led by Gazprom, the Russian monopoly, which has been accused of trying to bypass Ukraine, an important gas transit country to the EU.

EU regulators are yet to rule on the idea but EU sources have hinted they will use all legal instruments they have to delay the project.

It runs counter to the Energy Union strategy of aiming for at least three gas suppliers for every country.

Sefcovic: Nord Stream is not in conformity with the Energy Union's goals

The European Commission so far is only aware of general information about the project, and is therefore unable to make conclusive decisions, Commission Vice-President Maroš Šef?ovi? told EurActiv in an exclusive interview.

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For the tenth year in a row, EU states imported half of their energy needs in 2014. A third of their gas imports come from Russia alone and some newer eastern members are almost entirely reliant on Moscow.

Bad idea

Morningstar, now founding director of the Atlantic Council’s Global Energy Centre, said, “I think Nord Stream 2 is really a bad idea.”

German Vice-Chancellor Sigmar Gabriel has previously insisted the project is purely a commercial concern for Germany.

He has told Moscow that Nord Stream 2 could only proceed if gas flows through Ukraine continued after its transit contract with Russia – worth about $2 billion per year – expires in 2019.

Germany seeks to overcome opposition to Nord Stream 2

A new pipeline to double Russian gas flows to Germany will only go ahead if Russia does not cut off gas flows to Ukraine and eastern Europe, German Vice Chancellor Sigmar Gabriel told the Polish government on 29 January.

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Morningstar poured scorn on that idea as he spoke at the Wilfried Martens Centre for European Studies   in Brussels.

“That’s just plain wrong. Period,” he said.  It was impossible to separate the commercial from the political and always had been, he added.

Rewarding Russia with the pipeline after its annexation of Crimea sent the wrong political message, and would wreck the EU LNG strategy, he added.

Bud Coote, who retired from the CIA in May last year after decades of service as its leading international energy analyst, said that the more supplier options countries had, the lower prices the paid for Russian gas.

The European Union is already investigating whether Russian state energy firm Gazprom has imposed unfair prices which breach the EU’s rules, in a move which further inflamed relations already strained by the Ukraine crisis.

Background

Nord Stream was inaugurated on 8 November 2011, in the presence of then-President Dimitry Medvedev, and Chancellor Angela Merkel.

Led by Gazprom, which has put the cost of the plan at up to €9.9 billion and maybe less due to savings, the group is to build a third and fourth pipeline to transport up to 55 billion additional cubic meters of gas a year (bcm/y).

It would double the capacity of lines 1 and 2, which take the same route. The new pipelines are due to start transporting gas by the end of 2019.

Gazprom, E.ON, BASF/Wintershall, OMV, ENGIE and Royal Dutch Shell formed the consortium for the Nord Stream 2 project.

Further Reading

Germany-favoured Nord Stream-2 risks strangling Ukraine, US says

A proposed pipeline to boost Russian gas supplies to Germany risks depriving Ukraine of more than $2 billion in transit fees, and runs counter to the EU's goal of reducing its energy reliance on Russia, a US official said today (5 November).

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